Reinventing services in the mechanical engineering industry

Steinbeis student sets up innovation process

Especially in the machine building industry, small and medium-sized companies used to focus most of their energy on tangible goods and individual transactions. The idea of providing support services, i.e. classic after sales services, only came as an afterthought. In fact sometimes it was positively distracting, or a necessary evil. This was reflected in the lack of emphasis on developing new services. Until a few years ago, researchers and businesses completely ignored them. Thorsten Leidreiter is an in-house consultant at VOLLMER, a machine-making company in Biberach. He’s also on the executive MBA program at the Steinbeis Center of Management and Technology (SCMT) at Steinbeis University Berlin. As part of his studies he thought up an innovation process for services in the mechanical engineering industry.

More and more companies are finding that their products and technology are interchangeable, mainly due to globalization and increasingly transparent markets. There seems to be little room to differentiate products on technological grounds, and increasingly companies are not just having to fend off competitors at home, foreign marauders have entered the scene. As markets become more and more open, another dilemma has emerged: customers have more and more suppliers to choose from. On the upside however, open markets allows access to international markets and new customers. As a result, lots of companies are having to differentiate themselves by offering something new. The big challenge is to adapt strategies and shift away from being a classic productoriented machine maker to a technology and service provider.

VOLLMER, a southern German machine maker faced a similar challenge so the company embarked on a strategic project to complement its operative services such as after-sales, replacement parts and training. The aim of the project: to realign the service area with novel ideas and translate them into practice. As part of the project, three of the project team members used their master’s thesis to think up concepts, all of which had to fit together. One of them was Thorsten Leidreiter who had already looked at the issue during an earlier project. By offering a comprehensive portfolio of services, new customers could be recruited and retained. Thorsten Leidreiter’s aim was to rethink the methods used to develop new services and revise how they are marketed at home and abroad, especially given the different nature of services. One of the chief aims of the overall project was to add a fresh sheen to company services.

Leidreiter’s aim was to demonstrate to the machine making company that there are ways and means in business to business markets to be innovative with services. He tabled a variety of methods, from idea generation techniques to creating product concepts, validation techniques, testing methods and even service marketing. This culminated in a systematic innovation process which he coined MOrITS, an acronym in German for a “marketoriented innovation [funnel] for services”.

Leidreiter finalized his funnel with individual steps along the way and a battery of process instruments. The filtering process outlined in Leidreiter’s thesis consists of several steps which are used to derive the possible actions needed to systematically innovate with services. The tools and techniques involved could be production development meetings, creativity workshops with customers, leaduser methods, evaluating customer questionnaires or complaints, benchmarking exercises, brainstorming sessions, strategy meetings, exchanging ideas internally and externally and drawing on inspiration from emerging technology.

Generating and introducing a service idea starts with a three-phase process of idea generation, service design and testing. Each idea has to go through these phases before they can be marketed. When marketing the services, the 7 Ps are used. Depending on the type of service, how it is provided and its fit with other services, a selling concept is then developed. This selling concept usually takes the form or a service manual, which in this case was also the basis of one of Thorsten Leidreiter’s colleague’s master’s thesis.

Leidreiter believes his concept provides the company with all the right tools for innovating with services, emanate from each phase of the funnel process, influential features of the MOrITS model and the manner in which it dovetails with the overall VOLLMER services project. Customer opinion also plays an important role in the process. In fact it should shape the whole innovation process. It can be gauged through customer surveys, complaints or actively engaging customer in product development meetings in each of the individual phases. Which phases they are is decided by VOLLMER service developers on a product by product basis.

In the second part of the funnel process the marketing concept is created using the 7 Ps: product, place, price, promotion, people, physical evidence and process. This involves working out key actions, if possible underpinned by examples.

Thorsten Leidreiter’s funnel process will not just be applied to the development of new services. At regular intervals – at least every two years – the company will use it to benchmark existing services. The company places a strong emphasis on data quality, and how good it is at predicting the efficacy of agreed actions as well the overall development process for new services. For example, it can not set up proper replacement part deals if the data (on things like the customer base, existing machine set-ups, the nature of the production program, and shift practices), is unreliable. Also, Leidreiter’s model will only work if the company culture becomes more service oriented. The company is currently embarking on its first steps. For everyone to be thinking constantly about the service mentality, they have to be more closely involved in the delivery of services. The best way to achieve this is to be open with internal communication. It is also absolutely essential to work more closely with customers when developing services. In the long term Thorsten Leidreiter recommends that his company set up a service sales department in combination with product management.

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